Q: I have heard that I need to shop around for a home loan in order to get the best interest rate. I have also been told that the higher my deposit, the better my interest rate offer will be. The rates seem to differ in many cases by less than a percent, so how much difference can this really make?
A:
By way of example, in the last quarter of 2020, BetterBond was able to secure an average interest rate concession of 0.61% - the difference between the best and worst offers received from all the banks, resulting in an average saving of 0.61% for the buyer.
To put that into real terms, if your bond was R2 million, you would save R174 000 over the full 20-year term or R725 a month.
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Based on a R2m bond over 20 years, here is a breakdown of the monthly repayments and savings based on different interest rates:
Interest rate Monthly repayment Total repayment Saving
7% (prime) R15 506 R3 721 434 N/A
6.83% R15 302 R3 672 612 R48 822
6.66% R15 100 R3 624 108 R97 326
6.49% R14 840 R3 575 926 R145 508
6.39% R14 782 R3 547 734 R173 700
The good news story of lower interest rates and improved affordability is starting to spread and we believe that even more home buyers will apply for bonds before the repo rate starts its gradual increase towards the end of the year, or even next year.
– Carl Coetzee, chief executive of BetterBond